HC Deb 19 July 1979 vol 970 cc1966-8
2. Mr. Jesse

asked the Chancellor of the Exchequer how recent changes in the exchange value of the £sterling are likely to affect the prospects for the British economy.

The Chief Secretary to the Treasury (Mr. John Biffen)

Changes in the exchange rate affect the economy in different ways. The recent rise in the rate may make it harder in the short run to sell our exports, but the rise also lowers the cost of imported raw materials.

Mr. Jessel

Will my right hon. Friend say whether, as a result of the new strength of the pound, he is able to forecast whether, over a period of years, the benefits from lower import prices will be greater than the disadvantages through higher export prices?

Mr. Biffen

No. Any such forecast would be very hazardous.

Mr. J. Enoch Powell

Will the right hon. Gentleman try to prevent statements emanating from Government quarters which suggest that a rise or fall in the exchange rate causes an acceleration or a deceleration of inflation?

Mr. Biffen

I have noted the views of the right hon. Gentleman, but I do not regard it as my responsibility to correct my colleagues, who I am certain are well able to take responsibility for their own views.

Mr. Onslow

Will my right hon. Friend have discussions with the Secretary of State for Defence about the desirability of ending the practice whereby overseas defence sales are quoted in dollar prices?

Mr. Biffen

I shall draw my hon. Friend's point to the attention of the Secretary of State for Defence.

Mr. Healey

Is the right hon. Gentle. man at all concerned about the growing anxiety expressed by leaders of British industry—particularly yesterday, according to the Financial Times, which mentioned the heads of Courtaulds, of Wedgwood and of Gestetner—that the present sterling rate is totally incompatible with the survival of their companies as viable businesses? Is the right hon. Gentleman yet in a position to give us the date on which he will follow the example of Switzerland, which in the end decided to abandon its monetary policy for the sake of saving its industry?

Mr. Biffen

Representations made by people such as the chairman of Courtaulds will obviously be taken into account, and certain areas of British industry, particularly with a low value added tax content, are bound to experience difficulties with a movement in the exchange rate, as we have seen recently. I shall bear very much in mind the views expressed by the right hon. Gentleman's right hon. Friend the Member for Llanelli (Mr. Davies), who, during the Committee Stage of the Finance Bill, said that the exchange rate of sterling was something that was substantially beyond the control of the Government.

Mr. Healey

Surely the right hon. Gentleman has followed the Swiss experience. Since Switzerland abandoned monetary policy for the time being, its exchange rate has reverted to a more normal pattern. That is the best possible example, coming from a country whose monetary policies I am sure the right hon. Gentleman has admired, to show that it is possible for the Government to influence the exchange rate.

Mr. Biffen

The Government have no intention of abandoning their monetary policy. I am surprised that someone as intellectually powerful as the right hon. Gentleman should suppose that the abandonment of that policy would lead to a reversion of sterling.